New vehicle prices surged by 7.01 percent year on year in the second quarter, the highest quarterly rate of increase since the first quarter in 2010, while June was the seventh consecutive month that new vehicle inflation came in higher than the annual increase in the consumer price index (CPI).
New vehicle inflation last consistently outstripped the CPI rate at the height of the recession in 2008/2009. CPI inflation was 6.6 percent in May.
The year-on-year change in new vehicle prices has risen from 3 percent in the second quarter of last year to 4.1 percent in the third quarter, 5.6 percent in the fourth quarter and 6.58 percent in the first quarter of this year.
The latest quarterly TransUnion vehicle pricing index released yesterday also revealed the ongoing stagnation in used vehicle prices.
Used car inflation fell to 0.58 percent year on year in the second quarter after rising out of deflationary territory for the first time in more than a year to 0.83 percent in the first quarter.
Keith Dye, the chief executive of vehicle risk intelligence company TransUnion Auto Information Solutions, said yesterday that the inertia in used vehicle prices and surging new car price inflation was indicative of the tenuous state of the local automotive industry.
He said while the increase in new car prices had largely been anticipated because of the volatility in the value of the rand, the decline in used car inflation in the second quarter was unexpected.
“This drop may seem insignificant but it marks a worrying trend as the used industry struggles to make up lost ground. Not only did the upward month-on-month price movement seen in the first quarter of 2014 reverse in the second quarter… used [car] inflation appears to be on an accelerating downward trajectory once again.”
Dye said new car inflation was moving rapidly in the other direction.
TransUnion publishes the vehicle price index quarterly. The index is calculated from data it receives on monthly sales returns from thousands of dealers throughout the country and vehicle financing registrations from all of the major banks and vehicle finance houses.
Dye added that the good news for the used vehicle market was that the trend towards the purchasing of used rather than new vehicles, which emerged in the first quarter, appeared to be continuing.
The ratio continued to move in favour of used cars in the second quarter, when 1.67 used vehicles were financed for every new passenger and light commercial vehicle. This was up from 1.53 used vehicles for every new vehicle financed in the first quarter, and 1.25 used vehicles to every new vehicle in the final quarter of last year.
Dye said TransUnion anticipated this trend would persist as new car prices continued to rise, albeit not as sharply as they have so far this year, while used vehicle prices were likely to keep on drifting for the next few months.
He said overall demand for new and used vehicles was set to remain sluggish for the foreseeable future given the fragile state of consumer credit health, while banks were likely to maintain their tight grip on credit extension in the wake of the credit amnesty.
Nico Vermeulen, the director of the National Association of Automobile Manufacturers of SA, said this week that domestic sales would continue to be affected by general economic conditions, exchange rate-induced new vehicle price increases and upward pressure on interest rates.
He said that the domestic market was likely to register a decline in volume terms of around 5 percent compared with last year, with the main impact on sales of new cars and light commercial vehicles.